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We face big challenges to help the world’s poorest people and ensure that everyone sees benefits from economic growth. Data and research help us understand these challenges and set priorities, share knowledge of what works, and measure progress.

Overview

Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Swaziland. Its long Indian Ocean coastline (of 2,500 kilometers) faces east to Madagascar. About 70% of its population of 28 million (2016) live and work in rural areas. It is endowed with ample arable land, water, energy, as well as mineral resources and newly discovered natural gas offshore; three deep seaports; and a relatively large potential pool of labor. It is also strategically located, with four of the six countries it borders landlocked and hence dependent on it as a conduit to global markets. Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of Southern Africa as a whole.

Political Context

The Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo) remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM). While Frelimo won the most recent presidential elections in 2014, and retains a comfortable majority in parliament, the two main opposition parties have both gained ground. Renamo, former rebel group, has maintained its militia after the peace accord of 1992 and from time to time parts of the central region register sporadic armed conflict. Peace talks are underway, and as a result the President announced (February 2018) a breakthrough agreement in the form of a constitutional amendment submitted to the parliament for ratification Discussions aimed at integrating Renamo fighters in the army are continuing.

Economic Outlook

Mozambique continues to suffer from the effects of the 2016 hidden debt crisis.Real gross domestic product (GDP) growth decelerated to 3.7% in 2017, down from 3.8% in 2016 and well below the 7% GDP growth achieved on average between 2011 and 2015. Small and medium enterprises have fallen back and their capacity to generate jobs has been restricted even further. Growth is expected to remain relatively flat at around 3% in the medium-term.

Inflation has eased to 7%, supported by a more stable currency, the metical, and falling food prices. Post- El Niño agricultural output growth contributed to this trend, as did lower food inflation.

Debt levels remain unsustainably high. External debt declined from 103.7% of GDP at end-2016 to an estimated 85.2% by end-2017, mainly due to the appreciation of the metical. In the meantime, central government domestic debt levels have increased due to budget financing needs. Mozambique continues to be in default of its Eurobond and the two previously undisclosed loans. The government has launched discussions with creditors on a possible restructuring but this process will likely take time to bear fruit.

Development Challenges

The main challenges are restoring macroeconomic stability and reestablishing confidence through improved economic governance and increased transparency, including the transparent handling of the hidden debts investigation. Moreover, structural reforms are needed in support of the currently struggling private sector.

Another major challenge for the economy is to diversify away from the current focus on capital-intensive projects and low-productivity subsistence agriculture toward a more diverse and competitive economy, all the while strengthening the key drivers of inclusion, such as improved quality education and health service delivery, which could in turn improve social indicators.

Last Updated: Apr 19, 2018

World Bank Group Engagement in Mozambique

Since 1984, the World Bank Group (WBG) has been providing development assistance to Mozambique in accordance with the country’s needs and priorities, from economic stabilization in the 1980s, to post-war reconstruction in the early 1990s, to a comprehensive support strategy in the late 1990s.

The current strategy, renamed the Country Partnership Framework (2017-20­210), involved close collaboration with the government, development partners, civil society, and the private sector. The strategy’s focus areas are (a) Promoting Diversified Growth and Enhanced Productivity; (b) Investing in Human Capital; and (c) Enhancing Sustainability and Resilience.

The current International Development Association (IDA) lending portfolio to Mozambique is large and diverse. As of March 2018, the World Bank portfolio in Mozambique is composed of 19 projects, with a net commitment of USD 1.8 billion in IDA funds. IDA activities are complemented by those of the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The IFC’s approach is to focus on strategic industries, namely, agribusiness, forestry, mining, energy, industry and financial services, and its interventions seek to address cross-cutting issues of: (i) supporting the mobilization of both local and foreign direct investment to key sectors of the economy; (ii) strengthening private sector access to finance; (iii) supporting the development of infrastructure; (iv) improving the investment climate; and (v) strengthening small and medium enterprises (SME) management capacity building. As for MIGA, it has investments under guarantees in Mozambique.

Last Updated: Apr 19, 2018

Improving Service Delivery in Maputo’s Poor Neighborhoods

The World Bank and Maputo city teamed-up to develop an innovative digital platform called MOPA, which radically improved solid waste management in underserved communities. The platform makes it possible for people to notify municipal authorities in real time, allowing for greater responsiveness and accountability in solid waste collection. In a little more than a year of implementation, as many as 186 informal dump sites across the city have already been eradicated and thousands of solid waste issues have been resolved.

Placing Results Front and Center in Health and Education in Mozambique

Mozambique pioneered an IDA results-based-financing approach in health and education which served as an incentive for best practices and good governance in health and education. Thanks to the program, sectors created their own incentives to drive behavior change resulting in tangible improvements in the medicine supply chain and primary school management. The program also contributed to the reduction of medicine stock outs, the improvement of quality of care and treatment outcomes, as well as improved school governance and learning outcomes

Providing Low-Cost Irrigation for Smallholder Farmers

The World Bank is investing $70 million to help small farmers grow and sell rice and vegetables through rehabilitated and expanded irrigation schemes in the central provinces of Manica, Sofala, and Zambézia. More than 6,000 people have directly benefited from the Sustainable Irrigation Development Project (PROIRRI) so far. At completion, the project is expected to ensure irrigation more than 3,000 hectares, of which 1,700 ha are dedicated to rice production, 800 ha for horticulture, and 500 ha for contract production.

Supporting Rural Electrification in Mozambique

The World Bank supports the expansion of photovoltaic solar energy programs, connecting over 500 rural health centers and 300 schools throughout Mozambique. The $120 million International Development Association-funded project contributed to building new transmission lines and distribution networks, expanding access to electricity. The Bank also supports the use of environmental-friendly cooking stoves, which brings down pressure on wood fuels, reduces deforestation, and protects women and children against carbon monoxide and volatile particles emanating from coal.

Last Updated: Apr 19, 2018

The World Bank Group (WBG) works closely with other development partners to improve the quality and effectiveness of development assistance to Mozambique. Collaboration with development partners has also focused on education, health, roads, and fiduciary and monitoring and evaluation.